Today, in our series of Cost Savings for Shipping we focus on the Less-Than-Truckload (LTL) mode. It is the most common method used for domestic bulk B2B shipping. If used correctly, LTL shipping can be a cost-effective way of shipping freight, usually palletized. However, to maximize your savings there are some helpful things you should ensure your business is doing. While not all of these tips will be applicable to every business you should be able to glean at least a couple of things you can take back and apply.
Negotiate a FAK with Your Carriers
And…right out of the gate we drop a not too familiar but impactful acronym. FAK stands for Freight All Kinds. It literally means just that. Before we get further into FAKs let’s get clarity on how freight is classified. All LTL shipments should have a NMFC (National Motor Freight Classification) classification called a class. These freight classes range from 50 to 500. The lower the class the more dense the product is and is more ideal freight for the carriers. Thus, your pricing will be more beneficial for this type of freight. Some examples of Class 50 freight would be bricks, heavy materials, and larger consumer goods. They have to fit on the standard pallet (48×40) to be considered ‘clean freight.’ Some examples of Class 500 freight would be a pallet of pillows or ping pong balls. This freight takes up the same amount of space as a more dense load but hurts trailer utilization on a weight basis. Also, this freight is not durable enough to be double-stacked so further hurts trailer utilization. This type of freight can be wildly expensive to ship on pallets. It may make more sense to ship these goods UPS Hundredweight or FedEx Multi-Weight parcel. A lot of freight falls in the class range of 70-125. There are eighteen different classes of freight altogether.
So where does FAK come into play and how does it work? Negotiating a FAK with your LTL carriers gets all of your freight classified to one selected class. So if you had some freight that was 70 and some that was 92.5 (yes, there is actually class tiers with decimals), you could negotiate all of your freight to be rated at FAK 70. Carriers are pretty flexible with this but a lot of customers are unaware it exists or are unsure on how to negotiate. The key thing is your freight generally has to be in the same neighborhood. If you have both freight that is a Class 50 and freight that is a Class 500, you are not likely to get a FAK as the carrier won’t want to take a bath on the high classed freight. Usually, however, a business is shipping a singular or grouped commodity so the class ranges are close together. FAKs are very common.
Pro Tip: Negotiate the lowest FAK you can possible and do it across all your carrier contracts. This will absolutely lower your LTL shipping costs.
Enter Accurate Information
If you are prepping your LTL shipments it is important that you are entering accurate information on the corresponding BOL (Bill of Lading). Some shippers will take best guesses at the weight of a pallet. They will take the number of units, plus corrugate estimate, plus pallet weight (30 to 40lbs). Most of the national and regional carriers now weight each pallet once they are picked up and brought back to a consolidation hub. If you say your pallet weighs 340lbs and it actually weighs 400lbs you can expect to get hit with a new freight charge to make up the difference and often a reweigh fee. This is also a good way to get your freight reclassified as now instead of moving through the LTL network the pallet has been stopped and likely will be inspected.
You need to make sure the following information is accurate on your BOL: Ship From and Ship to Address, Billing Terms (Prepaid, Collect, 3rd Party), Freight Description, Freight Class or FAK, # of pallets, # of cartons, and weight. Having any of these items incorrect can lead to delays in your shipment and additional unplanned charges. It also a good idea to have pallet labels attached to each pallet in case the freight gets separated.
Pro Tip: Take the plunge and buy a floor pallet scale. This will give you accurate information and save you in the long-run. They typically run between $400-1,000.
Maximize Your Shipment Density
One of the absolute best ways to save money while shipping LTL is ensuring your freight density is high. You should always keep safety first but take advantage of the footprint of the pallet. Using the standard pallet you know you have 48 inches length and 40 inches width to play with. The height, however, is variable. Typically, 72 inches is about as high as you want to go, but trailer heights are typically 102 inches so you can get away with freight stacked as high as 98 inches with most carriers. The problem with the higher freight though is it not stackable so considered less dense. Some carriers are actually charging for freight marked non-stackable now. Regardless of the height of your palletized shipment, you want to make sure it is packed as tight as possible. Don’t use larger cartons that your products need. Make use of all your cubic feet available per pallet. If you can make your pallets so they are stackable even better.
Pro Tip: Just like with parcel shipping you don’t want to be using ill-fitting cartons for your freight. The freight should be very snug within the corrugate. This is good for both density and keeping your shipment safe in transit. Loose cartons often collapse in transit and causes the tops of pallets to topple. Be sure to limit product over-hang and use extra-shrink wrap, as well!
Are you frequently sending freight to the same location within the same month or even week? Well, it is much cheaper for you to consolidate these pallets into one shipment. It really is pretty black and white. Which do you think is going to be cheaper: 5 shipments with 1 pallet each or 1 shipment of 5 pallets? If you guessed the latter you are correct and can collect your prize at the door. It is much cheaper to ship with consolidated shipments.
One thing to be cognizant of on consolidation is ensuring you are not sending too many pallets LTL. Once you hit about 8-10 pallets on a shipment it is usually cheaper to ship as TL (truckload). Here, you are essentially ‘buying the truck’ for your move. The benefit here is direct transportation from your facility to your customer’s. This takes out the extra handling you see with LTL shipments which have a higher damage rate. Once you start getting into the eight (8) pallet range you may see what are called volume quotes. These are kind of the in-between zone of too much freight for an LTL, but maybe not enough for a FTL (full truckload). You should compare your volume quote to a truckload quote and see which is cheaper.
Pro Tip: If you are shipping eight (8) or more pallets compare your LTL, volume, and truckload quotes. Don’t assume one mode will always be the cheapest. Depending on the carrier and the lane the best result could vary shipment-to-shipment.
Partner with a 3PL
If you are a small to medium-sized business you won’t have a lot of buying power in the LTL market. You can certainly get better than ‘street rates,’ but until you have enough volume of daily/weekly LTL shipments your pricing won’t be great. Partnering with a 3PL like Lessgistics, opens you up to a more beneficial pricing stucture. 3PLs have more aggregated volume and thus more heavily discounted LTL pricing. Also, they are often shipping out many LTL shipments on a daily basis across several carriers. They can rate shop across all of these carriers to get you the best pricing. Finally, they are continuously renegotiating pricing contracts as their volume increases as new customers onboard. Partnering with a 3PL will absolutely save you shipping costs for LTL shipments!
Pro Tip: Never, ever get a spot quote for freight. It will be expensive! Either get negotiated rates with a carrier or reach out to a 3PL to take advantage of their rate structure
Understanding the LTL shipping market can be difficult. It is an antiquated market that needs modernized. Between classes of freight, FAKs, and volume quotes there is a lot to consider if you are a smaller business. You will want to make sure you negotiate a FAK in all of your LTL contracts. You’ll also want to ensure your freight is properly classified and that all of your paperwork is accurate. Further, you want to maximize your freight density to save on shipping costs. Finally, if the world of LTL shipping is too much for you to navigate and/or you are looking for improved cost structure you should really partner with a 3PL, like Lessgistics.
If you have any questions at all we love to help businesses become more cost-efficient. Drop us a line at firstname.lastname@example.org